Farewell America

9

The American people will find it hard, as I do, to accept a situation in which a tiny handful of steel executives whose pursuit of private power and profit exceeds their sense of public responsibility can show such utter contempt for the interests of 185 million Americans.

PRESIDENT KENNEDY, April 11, 1962

Engraved over the entrance to the Business School of Columbia University is a motto which exhorts the nation's businessmen to a "high sense of duty." Since the death of Roosevelt, whose very name they reviled,(1) the businessmen had been left to their own devices. Truman and Eisenhower had been modest petty bourgeois, and Nixon would certainly have followed in their footsteps. The businessmen were wary of President Kennedy, who as a young Senator from Massachusetts had opposed the Taft-Hartley law and neglected the industrialists of his state. Kennedy did not regard profit-making as the most esteemed of vocations. Brought up in a family of millionaires and a millionaire himself, he was not impressed by other millionaires, nor did he consider the successful businessman the most admirable of beings. He liked to quote from Dr. Johnson: "A merchant's desire is not of glory but of gain; not of public wealth, but of private emolument; he is therefore rarely to be consulted on questions of war or peace, or any designs of wide extent and distant consequence." He was well aware of their power, but he did not trust the Titans. When he became President he declared, "Taken individually, labor leaders are often mediocre and egotistical, but labor as a whole generally adopts intelligent positions on important problems. On the other hand, businessmen are often individually enlightened but collectively hopeless in the field of national policy."

Eisenhower sought out the Titans, respected their advice, and treated them as they thought they deserved to be treated -- in other words, as representatives of the most influential body in the nation. Kennedy kept his distance. Prior to his election he had had little contact with industrial circles, and once he was in the White House he saw even less of them. Businessmen were generally excluded from the Kennedys' private parties. Not only did he "snub" them (in the words of Ralph Cordiner, President of General Electric), he also attacked them. Kennedy did not consult the business world before making his appointments. The men he placed at the head of the federal regulatory agencies were entirely new.(2) Since the end of the war, the businessmen had become accustomed to considering these bodies as adjuncts of their own professional associations. They were more indignant than surprised. They attempted to intervene, but in vain. The President had a mind of his own.

In January 1961, the nation seemed stable and prosperous. The economy was suffering from a slight recession, but the level of unemployment was considered acceptable.(3) But in his first State of the Union Message on January 30, Kennedy spoke of the changes needed in terms that seemed to echo the words of Franklin D. Roosevelt as he inaugurated the New Deal, at a time when the economy of the United States had struck bottom and the Titans were nearly asphyxiated. "The present state of our national economy is disturbing," he began. He called for "urgent increases in federal expenditures in the fields of housing, urban renewal, school construction, medical research, and juvenile delinquency." He proposed a new plan for the economic, social and cultural development of foreign countries.

The President's policy towards Latin America alarmed the businessmen even more than it worried the Pentagon and the diplomatists. The business world foresaw the economic consequences of the President's foreign policies. In Strategy of Peace, he had written:

"Just as we must recall our own revolutionary past in order to understand the spirit and the significance of the anti-colonialist uprisings in Asia and Africa, we should now reread the life of Simon Bolivar, the great 'Liberator' of South America . . . in order to comprehend the new contagion for liberty and reform now spreading south of our borders . . .

"Fidel Castro is part of the legacy of Bolivar, who led his men over the Andes Mountains, vowing 'war to the death' against Spanish rule, saying, 'Where a goat can pass, so can an army.' Castro is also part of the frustration of that earlier revolution which won its war against Spain but left largely untouched the indigenous feudal order . . .

"But Cuba is not an isolated case. We can still show our concern for liberty and our opposition to the status quo in our relations with the other Latin American dictators who now, or in the future, try to suppress their people's aspirations."

Later he added, "Our differences with Cuba do not concern the impulse that drives the people of this country toward a better life. The economic and social reforms undertaken in Cuba must be encouraged.

One of his closest advisers, historian Arthur Schlesinger, wrote: "All across Latin America the ancient oligarchies -- landholders, Church and Army -- are losing their grip. There is a groundswell of inarticulate mass dissatisfaction on the part of peons, Indians, miners, plantation workers, factory hands, classes held down past all endurance and now approaching a state of revolt."

Near Recife, Schlesinger had seen poverty-stricken villages full of starving children covered with scabs. He recalled that before Castro came to power Havana had been nothing but a giant casino and brothel for American businessmen over for a big weekend. "My fellow countrymen reeled through the streets, picking up fourteen-year-old Cuban girls and tossing coins to make men scramble in the gutter,"(4) he wrote.

The policies of the President and his advisers were certain to have economic repercussions. In April 1962, a year after the inauguration of the Alliance for Progress, Latin America, in the eyes of the conservatives, appeared headed for chaos. In Argentina, President Frondizi had just been overthrown by a military coup, and rioting had broken out in Guatemala and Ecuador. There was no country to the South that could be considered politically and economically stable.(5) Capital flowed back into the United States, frightened by the specter of Castroist revolution.

But the effect on the American economy threatened to be even worse. The businessmen could not accept concepts like those of Schlesinger, who declared that the essential thing was not, as Nixon had suggested, to stimulate the cosmetics industry,(6) but to build hospitals and to invest in sectors that affected the strength of the nation and the welfare of the people.

Kennedy and his team called themselves "liberals," but the most intelligent of their adversaries, like economist Milton Friedman, questioned their right to use this term. "As a supreme, if unintended compliment, the enemies of the system of private enterprise have thought it wise to appropriate its label," Friedman wrote.

To his adversaries, President Kennedy's economic policies appeared to be inspired entirely by a concern for public welfare to which they were fundamentally opposed. They quoted the words of Jefferson, "The government is best which governs least." Many of them preferred the freedom to make a million or go bankrupt to the governmental planning and regulation that diminished the range of these alternatives. Senator Barry Goldwater was a good example of this mentality. The little people considered the cowboy-grocer as one of their own, and the big men knew that, regardless of his political destiny, they had nothing to fear from him. For Goldwater, a General in the Air Force Reserve, intelligence was nothing but the "extremism of imbeciles." Turning his back on this kind of extremism, Goldwater expressed himself in vague definitions of the great problems of the day, asserting that unemployment was but "an excuse for the lazy," and the government "the end of individualism." But he turned serious when he wrote: " Welfare is a private concern . . . The current instrument of collectivism is the Welfare State. The collectivists have finally realized that it is possible to institute socialism through a policy of welfare as well as by nationalization. Welfare socialism is much more difficult to combat. It takes an individual and changes him from a spiritual creature, proud, hardworking and independent, into a dependent and animal creature.

"We must reject this false notion that Communism is brought about by poverty, illness, and other similar social or economic conditions. Communism is brought about by the communists, and by them alone. Communism is international conspiracy, and its goal is to re-establish slavery throughout the earth.

"The advent of a reign of freedom, justice, peace and prosperity is impossible until Communism has been defeated. The victory over Communism must be the principal and immediate goal of American policy. All other objectives are secondary. We must take the offensive. American civilization is man's greatest achievement in the history of the world . . .

"In Strategy of Peace, Kennedy actually described Fidel Castro as the 'heir of Bolivar, the great liberator of South America' . .. the same Bolivar who led his men across the Andes after declaring all-out war on Spain. We must fight Communist subversion throughout the Western Hemisphere, within our borders as well as in Central and South America, with all the weapons at our disposal. It is inconceivable that Castro, that show-off puppet, that lackey of Kennedy be allowed to make fun of us and jeer at our freedom only a few minutes' flying time from our closest city . . . Financial circles have been deeply disturbed by the recent events in Guatemala, Bolivia, and particularly in Cuba . . .

"In the last analysis, the choice is not between surrender or nuclear war. It is between winning or fighting a nuclear war. We must cut out extravagant and useless domestic programs and stop wasting our money on utopian foreign aid projects."

As if in answer, Kennedy declared on March 13: "For the first time we have the capacity to strike off the remaining bonds of poverty and ignorance -- to free our people for the spiritual and intellectual fulfillment which has always been the goal of our civilization . . .

"This political freedom must be accompanied by social change. For unless necessary social reforms, including land and tax reform, are freely made -unless we broaden the opportunities for all our people -- unless the great mass of Americans share in increasing prosperity -- then our alliance, our revolution, our dream, and our freedom will fail. But we call for social change by free men -- change in the spirit of Washington and Jefferson, of Bolivar and San Martin and Martin -- not change which seeks to impose on men tyrannies which we cast out a century and a half ago. Our motto is what it has always been -- progress yes, tyranny no -- progreso si, tirania no!"

Caracas(7) and then Bogota gave the President of the United States a warm welcome. In Mexico in June 1962, he paid tribute to the Mexican revolution, and in March 1963 in Costa Rica he defended the rights of the peasants to land and an education and called for an end to "the ancient institutions that perpetuate privileges." His enemies saw the Kennedy Administration as the ally of the "agitating popular forces" of the continent south of the border, "working towards progress and a better life for the masses by evolution if possible, or by revolution if that is the price that must be paid.(8)

Revolution! Many people thought that it had already invested the White House, despite the reassurances of the President. On February 13, 1961, he told the National Industrial Conference Board: "There is no inevitable clash between the public and private sectors -- or between investment and consumption -- nor, as I have said, between Government and business. All elements in our national economic growth are interdependent. Each must play its proper role -- and that is the hope and the aim of this administration . . .

"We will not discriminate for or against any segment of our society, or any segment of the business community. Weare vigorously opposed to corruption and monopoly and human exploitation -- but we are not opposed to business. We know that your success and ours are intertwined -- that you have facts and knowledge that we need. Whatever past differences may have existed, we seek more than an attitude of truce, more than a treaty -- we seek the spirit of a full- fledged alliance."

His tone annoyed his business audience, who thought they perceived a hint of paternalism, and who were somewhat less than eager to cooperate with the federal government. The Business Advisory Council discontinued its meetings and decided to break off relations with the Commerce Department. The members of the Council noted uneasily that the Kennedy virus had spread to Commerce Secretary Luther Hodges, a man they had thought they could count on.

The Democrats had inherited a rather mediocre economic situation from the Eisenhower Administration. 1961 was not a very good year. True, the national income had increased 19.6% between 1958-1961 as compared with its 1954-1957 level, corporate sales had risen 18.7%, and salaries had climbed 18.9%. But the prosperity of an economy is written in the balance sheet, and during the same period business profits had risen only 3.3% after taxes.(9) Critics also noted that the federal and state governments were steadily expanding, and that their expenditures equaled one-third of the gross national product.(10) Retail prices had remained stable, and wholesale prices had dropped 1%,(11) but the personal incomes of some of the Titans had also dropped.(12)

Things looked better at the beginning of 1962. The automobile industry, the economic thermometer of the nation, predicted an annual sales figure of 7 million cars, an increase of 1,500,000 over the previous year.(13) 1962 promised more than a recovery and less than a boom. In January Bradford B. Smith, an economist for US Steel, told the National Industrial Conference Board, "I have said to this group many times that as the nation goes, so goes the steel industry, only twice as fast. I would say the steel production in the first half of 1962 could look pretty good."

A month later, however, Roger Blough, Chairman of US Steel,(14) noted that overall industrial profits, which should have reached the figure of $35 billion in 1961,(15) were only $23 billion, and added that over the past three years hourly salaries in the steel industry had increased 40 cents (between 12 and 13%), while profits had been the poorest ever recorded in the history of steel. In 1961, 85% of these profits, he claimed, had been used to pay dividends. He declared that an economy should not be judged solely by its prices, which always depend on costs, but rather by the comparative level of costs and profits. Blough told US News and World Report that the President might understand businessmen, but that he certainly didn't like them. He recalled that President Kennedy had sent a letter to steel industry leaders in September 1961 warning them against any increase in prices. "The steel industry, in short, can look forward to good profits, without an increase in prices. Since 1947, iron and steel common stock prices have risen 397%; this is much better performance than common stock prices in general," the President had written.

On April 6, 1962, the Steelworkers Union agreed, at the request of the federal government, to limit its wage demands to a 10-cent-an-hour increase beginning on July 1, 1962.(16) On April 10, the steel industry announced a price increase of $6 a ton,(17) placing the President, the consumers, and the unions before the fait accompli. In the course of its history, the steel industry had often defied American Presidents, but it had forgotten what it was like to be thwarted. The following day at his press conference, the President declared: ". . . the American people will find it hard, as I do, to accept a situation in which a tiny handful of steel executives whose pursuit of private power and profit exceeds their sense of public responsibility can show such utter contempt for the interests of 185 million Americans."

This denunciation of the Titans stunned the nation. It marked the birth of a legend. The President's remarks made headlines throughout the world and were even quoted in Pravda, which expressed its surprise and satisfaction. The businessmen were disconcerted by the violence of his reaction and by the apparent extent of his public support, but Roger Blough maintained that his decision had been made "in the interest of the stockholders" and that the profits of the largest steel producers were 33% lower in the first quarter of 1962 than they had been in 1959.(18)

The administration replied that the dividends paid to the stockholders of the steel corporations in 1958-61 were 17% higher than those paid in 1954-57. The steel industry rejoined that profits had exceeded $1 billion in 1959, but that they had fallen to $807 million in 1961, endangering investment possibilities, the future of the steel corporations, and consequently the future of American industry. But, faced with FBI investigations, the pressure of public opinion, and the cancellation of government contracts, it yielded and revoked the increase.(19)

On May 7, 1962, US News and World Report wrote: "What happened is frightening not only to steel people but to industry generally . . . President Kennedy had the public interest at heart in acting as he did, but the results may not in the long run be what he intended them to be."

The following day at Atlantic City, speaking before the United Auto Workers Convention, Kennedy declared: "This administration has not undertaken and will not undertake to fix prices and wages in this economy. We have no intention of intervening in every labor dispute. We can suggest guidelines for the economy, but we cannot fix a single pattern for every plant and every industry . . . This is a competitive economy." We believe it has served us well, the free enterprise system."

The preceding day, May 7, Roger Blough had told the stockholders of US Steel: "this concept is as incomprehensible to me as the belief that Government can ever serve the national interest in peacetime by seeking to control prices in competitive American business, directly or: indirectly through force of law or otherwise." And he added that since 1950 wages had doubled, revenues from taxes on business had increased by 68%, the profits of storeowners and farmers had risen by 70% , while corporation profits had only increased by 2%. He remarked that in recent years the prices of many industrial products had increased, and that he did not see why there should be any discrimination against steel.

Replying to President Kennedy's remarks at Atlantic City on May 1, Walter Reuther, President of the United Auto Workers, declared that what the economy needed was "to increase demand, and therefore salaries." That same day Dr . Charles E. Walker, Executive Vice President of the American Bankers Association, made a speech at New Brunswick attacking increased federal expenditures and the concepts of the President's economic advisers.

May 28, 1962 was the blackest day on Wall Street since the 1929 crash. Steel holdings fell to 50% of their 1960 level. "This could become total war," declared Avery C. Adams, Chairman of Jones and Laughlin Steel, to the stockholders of his company. The unions began to wonder whether the consequences of the President's intervention might not prove more serious for them than for the corporations.(20) Allan Sproul, ex-President of the Federal Reserve Bank of New York, declared that "although there was no panic by stock-holders after the stock market crash of May 28, 1962, another May 28 might have different consequences. ((21)

In July 1962, the steel industry at Pittsburgh was working at only 55% of capacity, as compared to 70% in April. The steel companies noted that this crisis hit them just when they were faced with competition from foreign producers favored by lower costs and cheaper labor, and from related industries (plastics, aluminum, cement, glass, wood) that were becoming more and more diversified and more and more powerful. One of the paradoxes in the arguments of certain businessmen was the fact that, while rejecting any notion of federal intervention in their affairs, they called for greater protection against foreign competition.(22)

Business reaction was unanimous. Ralph Cordiner, President of General Electric, declared that Kennedy ought to reread his Lincoln,(23) and David Lawrence(24) wrote:

"The heavy hand of government has just won a pyrrhic victory . . . Economic facts cannot be changed merely because politicians dislike them. Nor can America's private enterprise system survive very long if the Federal Government itself engages in the mudslinging of class warfare and, in effect, tells an industry it must disregard profits, disregard dividends, and pay labor whatever the Administration says shall be paid even if, as in this case, it costs the industry an additional $100 million a year.

"Apparently (Mr. Kennedy) believed that the Administration could coerce the industry into submission. For what else was meant by Mr. Kennedy's statement that the 'Department of Justice and the Federal Trade Commission are examining the significance of this action in a free, competitive economy? . . . This implied a threat of criminal prosecution. It was a move designed to terrorize those who disagreed with the Administration . . . While denying any inclination toward state socialism, the President's action on steel prices points inevitably to a federal dictatorship over business."

And he concluded, "Socialism (is) often a forerunner of Communism."

Analyzing the battle underway, Richard E. Neustadt(25) wrote, "As far as I can observe it from abroad, the steel case was a classic demonstration of two things: of the tenuousness and uncertainty of presidential power -- one might almost say the weakness of the President's position -- coupled with almost incredible political naivete on the part of the US Steel Corporation."

Some months later, Kennedy explained his reaction:

"I think it would have been a serious situation if I had not attempted with all my influence to try to get a rollback, because there was an issue of good faith involved. The steel union had accepted the most limited settlement that they had since the end of the second war . . . in part, I think, because I said that we could not afford another inflationary spiral, that it would affect our competitive position abroad, so they signed up. Then, when their last contract was signed . . . steel put its prices up immediately. It seemed to me that the question of good faith was involved, and that if I had not attempted . . . to use my influence to have the companies hold their prices stable, I think the union could have rightfully felt that they had been misled. In my opinion it would have endangered the whole bargaining between labor and management, which would have made it impossible for us to exert any influence from the public point of view in the future on these great labor-management disputes which do affect the public interest."

In June 1962, at the height of the crisis, business circles in the United States were much more concerned about the President's style and personality than by the decline in the stock market, which it knew to be artificial, or the state of the economy, which it considered hopeful.(26) Kennedy's speech at Yale(27) on June 11 confirmed the worst fears of the businessmen:

"The great enemy of the truth is very often not the lie -- deliberate, contrived, and dishonest -- but the myth -- persistent, persuasive, and unrealistic. Too often we hold fast to the cliches of our forebears. We subject all facts to a prefabricated set of interpretations. We enjoy the comfort of opinion without the discomfort of thought . . .

"We cannot understand and attack our contemporary problems in 1962 if we are touched by traditional labels and worn-out slogans of an earlier era. But the unfortunate fact of the matter is that our rhetoric has not kept pace with the speed of social and economic change. Our political debates, our public discourse -on current domestic and economic issues -- too often bear little or no relation to the actual problems the United States faces . . .

"(These problems) cannot be solved by incantations from the forgotten past. But the example of Western Europe(28) shows that they are capable of solution -- that governments, and many of them conservative governments, prepared to face technical problems without ideological preconceptions, can coordinate the elements of a national economy and bring about growth and prosperity . . .

"Some conversations I have heard in our own country sound like old records, long-playing, left over from the middle thirties. The debate of the thirties had its great significance and produced great results, but it took place in a different world with different needs and different tasks. It is our responsibility to live in our own world, and to identify the needs and discharge the tasks of the 1960's . . .

"Nearly 150 years ago, Thomas Jefferson wrote, 'The new circumstances under which we are placed call for new words, new phrases, and for the transfer of old words to new objects.' New words, new phrases, and for the transfer of old words to new objects -- it is truer today than it was in the time of Jefferson, because the role of this country is so vastly more significant . . . As we work in consonance to meet the authentic problems of our times, we will generate a vision and an energy which will demonstrate anew to the world the superior vitality and the strength of the free society."

This was a serious speech. Not only did he attack the Titans, but also those of his fellow-citizens who took pride in their traditional stereotypes, their worn-out slogans, their old records, their ancestral cliches, their imaginary problems, and their prefabricated interpretations, and of whom Kennedy said that they were 150 years behind and understood nothing of the real problems of their times.

It was already late when he announced on television on August 13 that since he had entered the White House the gross national product had increased by 10%, industrial production had risen 16%, disposable personal income had gone up 8% ($30 billion), the unemployment rate had dropped by 1 million, and that in Carbon County, Pennsylvania, George Demart, aged 52, was finally able to support his family. He added that corporate profits had risen 26%, but those concerned were probably no longer listening when he concluded:

"We have to move ahead, and I know that there are those who oppose all these moves as they opposed moves in other days much as they opposed a ban on child labor and, more recently in the Senate, medical care for the elderly.

"This country would still be in the dark ages economically if we permitted these opponents of progress and defenders of special privileges to veto every forward move. But the president of the United States, I believe, and the Congress and all of us must be committed to action in our time."

The fever fell somewhat in the fall. Business was good, and 1963 looked better still. The increase in federal expenditures, defense contracts, and urban renewal projects acted as a stimulus on the economy. But businessmen remained pessimistic and distrustful. At the American Bankers Association Convention at Atlantic City on September 23-26, 1962, it was predicted that automobile production would drop by 500,000 units in 1963.(29) Most financial experts in New York and Chicago warned of a new recession.

There was no recession. On the contrary, the United States was in the midst of an industrial expansion.(30) But the federal government remained vigilant. In July 1962, it had protested to the banks, which were predicting inflation and deforming the financial market. In November it denounced unjustified price increases in the pharmaceutical industry. In 1963, its antitrust suits multiplied.

The tendency towards corporate mergers was accentuating.(31) Pursuing its traditional anti-trust role, the Justice Department opened investigations into price-fixing conspiracies and other illegal activities. This action brought positive results (prices of electrical equipment dropped 30%), but it infuriated industry." Mergers arouse acute suspicion of the Government's trustbusters," wrote US News and World Report.(32)

In January, the Justice Department asked a federal court to force the General Motors Corporation to dispose of its locomotive business and break up its merger with the Euclid Road Machinery Company. In a third case, it charged General Motors with monopolizing the manufacture and sale of inter-city buses.

In the face of such attacks, businessmen began to ask themselves what would happen when large companies attempted to grow or diversify through mergers. Was this the end of all corporate mergers? The Federal Trade Commission opened an inquiry into the relationships between 1,000 of the nation's largest companies. It was particularly curious about "joint ventures" and "reciprocity," or the extent to which big companies bought from their own best customers. To what extent did a steel company order its machinery from the machinery manufacturer who regularly bought its steel? How far did a truck manufacturer go in favoring a steel company that purchased its trucks?

General Dynamics was ordered to dispose of a division dealing in industrial gases that it had acquired five years before, and a merger of Consolidated Foods with a firm producing dehydrated onions and garlic was broken up after the FTC charged that the food firm had required some of its suppliers to buy the products of its new division. The FTC suggested that any merger might be judged illegal if it tended to promote reciprocal business.

The government brought price-fixing charges against a long list of industries, including milk, baked goods, silver products, copper tubing, pulpwood, brass-mill products, macaroni, sewing machines, etc., and in many instances won easy victories. In 1963, the Justice Department's Antitrust Division won 45 out of 46 cases.

Big business grew more and more concerned about the tendencies of the Kennedy administration, and industrialists aren't the type of people to sit around and chew their fingernails. Employers complained that they were continually placed at a disadvantage in their relations with the labor unions, which were backed by Washington. They felt that the National Labor Relations Board had abandoned the neutral position it had occupied under Eisenhower. "The NLRB is also affected by the spirit of crusade," declared Joseph L. Block, Chairman of Inland Steel. J. Mack Swigert added, "The financial power of the unions is so great that many employers can't risk a strike."(33)

Kennedy stated over and over again that he was opposed to government control of salaries and prices, but his administration intervened more and more often in labor disputes. Washington appointed mediators who stressed the "public interest," which was generally interpreted as favoring the unions. Federal pressure was exerted on numerous corporations, especially in the missile and space industry, which had not yet adopted the union shop. The regulatory commissions available to the President wielded considerable power.(34) The National Labor Relations Board ordered that workers fired for union activities, or who had lost their jobs because their employer refused to negotiate with their union, be reinstated with their back pay plus 6% interest.

The businessmen feared that the federal government would somehow take control of wages, (35) and their fears were voiced at the gatherings of the American Management Association, the National Association of State Labor Relations Boards, and the American Mining Congress. The Vice President for Labor Relations of the Ford Motor Company declared that the Kennedy administration appears to be "seeking some sort of halfway house between private bargaining and Government compulsion that will give it the degree of influence or control over the results that it conceives to be needed . . . it is prepared to go past the point of relying simply on reason and persuasion."

Others went much further. US News and World Report charged that "the machinery for a true socialist economy already exists," and quoted one financier who added, "The pension funds give considerable room for maneuver. By acting in a certain direction, they could be used to destroy the capitalist framework."

1963 could be considered a good year for business. But the businessmen didn't think so. The gross national product, wages, taxes, and prices had progressed satisfactorily, but the steel industry was still working at only 50% of capacity, and profits were lower than what businessmen thought they ought to be, and proportionally lower than what they had been in 1950.(36)

Speaking at the University of Chicago, Henry Ford declared, "How high are profits? By any relative measure, profits are now at about the same level as they were during the 1954 recession. Today, after 3 full years of rising prosperity for the rest of the economy, profits have finally climbed back up until they are as high as they were at their lowest point in the decade after the end of World War II. The reduction of federal income taxes is an important step in the right direction."(37)

Industrialists noted that the growth rate of the American economy in 1963 would be the lowest of all the industrialized countries, and emphasized that this lag could have "dramatic" consequences. They forecast that the Soviet Union would have caught up with the United States in terms of industrial production by 1975-80.

Kennedy responded to these predictions by pointing out that the exceptional growth rate of the Soviet Union was due in large part to its huge crop -three times larger than that of the United States -- of students in all branches of learning, future researchers, and future technicians, and he cited this as one more reason for assuring equal educational opportunities for all students and breaking down the financial barriers surrounding the universities.(38) He was especially concerned about unemployment: in 1963 there were 4,166,000 people out of work, as compared to 4,007,000 in 1962.(39) The businessmen were more concerned about federal deficits and expenditures.(40)

In 1962, Kennedy had elected to pursue a new economic and financial policy based on the potential gross national product.(41) To bring this potential into being, it was necessary to create "fiscal drag" -- in other words, to reduce taxes on individuals and corporations. On December 14, 1962, speaking to the members of the Economic Club at the Waldorf Astoria Hotel in New York, the President upset the traditional economic thinking not only of the businessmen, but also of the members of Congress. Many Congressmen were violently opposed to any increase in federal spending, which they blamed for weakening the dollar, and considered the budget deficit as an evil in itself which should be reduced by all possible means. But Kennedy felt differently.(42) He began by reassuring them: "To increase demand and lift the economy, the Federal Government's most useful role is not to rush into a program of excessive increases in public expenditures, but to expand the incentives and opportunities for private expenditures."

But he went on to declare, "Our practical choice is not between a tax-cut deficit and a budgetary surplus. It is between two kinds of deficits: a chronic deficit of inertia . . . or a temporary deficit of transition, resulting from a tax cut designed to boost the economy, increase tax revenues, and achieve . . . a budget surplus."

The President planned to apply PPBS, which had been used so successfully at the Defense Department, to the federal budget,(43) but in 1963 the primary problem was that of balancing the budget. Kennedy proposed a Keynesian program of budgetary deficit designed to encourage economic expansion.(44) This classic plan consisted of alleviating fiscal pressure without a corresponding decrease in public expenditures. A tax cut, investment tax credit, and a simultaneous increase in public spending would increase demand and stimulate consumption.

On January 17, 1963, President Kennedy presented both his 1963 budget and his proposals for a tax cut and tax reform to Congress. Senator Harry F. Byrd and Representative Wilbur D. Mills, respectively chairman of the Senate Finance Committee and the House Ways and Means Committee, voiced their opposition to the plan. "Power feeds on power. Big government is too big,"(45) said Senator Byrd, who added that in his opinion confidence was not reassured by expanding federal domination and control, or judicial usurpation of power, or excessive federal spending, and that he was feeling the oppression of all three.

What Kennedy wanted was not simply a temporary tax cut, but a thorough revision of the American fiscal system. The tax reform sealed his fate.

Some Americans were opposed to it on principal, like the Florida businessman who found himself in the same plane with Douglas Dillon one day in 1962. The Treasury Secretary spent some time explaining the tax reform in terms of this man's corporate outlook and income, and the businessman was most impressed. Finally, as the plane landed at Miami, he turned to Secretary Dillon and said, "I am grateful to you for explaining the bill. Now tell me just once more: why is it I am against it?"(46)

The answer came from Barry Goldwater:

"We have been persuaded that the government has an unlimited right to appropriate the wealth of the people. The government has the right to demand an equal percentage of the wealth of every man, and no more. This is as valid for incomes as it is for gifts and inheritances. Taxes should be the same for everyone, as they are for cigarettes. Progressive taxation is a confiscation.

"It is scandalous that a man who earns $100,000 a year contributes 90% of his revenue to the national budget, while a man who earns only $10,000 contributes only 20% . It is a penalty for success."

But taxes weren't the same for everyone. The President was astounded to learn that of the 19 Americans whose income exceeded $5 million a year, 5 paid no income tax at all in 1959, and none of the 14 others had been taxed in the $5 million a year bracket, and that in 1954 one American with an income of $20 million a year had not paid a cent of taxes. Similar examples abounded. In most cases, these scandalous exemptions were the result of the multiple deductions and loopholes that the tax system offered to certain corporations, notably in the oil industry.(47)

Kennedy was determined to put an end to these abuses. Already, on April 20, 1961, the day he learned of the failure of the Bay of Pigs invasion, he declared before Congress:

"A strong and sound Federal tax system is essential to America's future . . . The elimination of certain defects and inequities as proposed below will provide revenue gains to offset the tax reductions offered to stimulate the economy . . . Special provisions have developed into an increasing source of preferential treatment to various groups. Whenever one taxpayer is permitted to pay less, someone else must be asked to pay more. The uniform distribution of the tax burden is thereby disturbed and higher rates are made necessary by the narrowing of the tax base. Of course: some departures from uniformity are needed to promote desirable social or economic objectives. But many of the preferences which have developed do not meet such a test and need to be reevaluated in our tax reform program."

And he added, "The war on poverty is not over. It has just begun."

The 1963 tax reform was aimed at: 1) relieving the hardships of low-income taxpayers and older people, and encouraging economic growth; 2) revising the tax treatment of capital gains to provide a freer and fuller flow of capital funds; and 3) broadening the base of individual and corporate income taxes so as to remove special privileges, correct defects in the tax law, and provide more equal treatment of taxpayers.

But the most important aspect of this reform focused on the tax provisions which "artificially distort the use of resources." The President declared that "no one industry should be permitted to obtain an undue tax advantage over all others" and called for the correction of defects in the tax privileges granted the mineral industries, the oil industry first of all.

As they read through the 24 pages of Document No. 43, the President's Tax Message to Congress, certain businessmen had good reason to be against it.(48) They were far less interested in the health of the American economy(49) than in the rate of their profits.

On November 18, 1963, three days before his death, President Kennedy presented his economic report to the Florida Chamber of Commerce:

"For the first time in many years, in the last 18 months, our growth rate exceeds that of France and Germany. It is because, as Fortune magazine recently pointed out, corporate profits in America are now rising much faster than corporate profits overseas . . .

"By next April, with the indispensable help of the pending tax cut bill, the United States will be sailing with the winds of the longest and strongest peacetime economic expansion in our Nation's entire history."

And he concluded:

"I realize that there are some businessmen who feel they only want to be left alone, that government and politics are none of their affairs, that the balance sheet and profit rate of their own Corporation are of more importance than the worldwide balance of power or the nationwide rate of unemployment. But I hope it is not rushing the season to recall to you the passage from Dickens' 'Christmas Carol' in which Ebenezer Scrooge is terrified by the ghost of his former partner, Jacob Marley, and Scrooge, appalled by Marley's story of ceaseless wandering, cries out, 'But you were always a good man of business, Jacob.' And the ghost of Marley, his legs bound by a chain of ledger books and cash boxes, replies, 'Business? Mankind was my business. The common welfare was my business. Charity, mercy, forbearance and benevolence were all my business. The dealings of my trade were but a drop of water in the comprehensive ocean of my business.'

"Members and guests of the Florida Chamber of Commerce, whether we work in the White House or the State House or in a house of industry or commerce, mankind is our business. And if we work in harmony, if we understand the problems of each other, and the responsibilities that each of us bears, then surely the business of mankind will prosper. And your children and mine will move ahead in a securer world, and one in which there is opportunity for them all . . ."

But many businessmen were indifferent to harmony, the problems of mankind, the future of their children, and Charles Dickens. Four days later, President Kennedy landed at Dallas. There is no stronger hate than that of the robber barons.

On February 26, 1964, Congress approved Public Law 88- 272, which amended the Internal Revenue Code of 1954. Nowhere in the 128 pages of this act, however, will you find the provisions concerning the "removal of certain inequities" requested by President Kennedy.

In April, 1964, now that they had a President "who understands business," in the words of W. B. Murphy, President of the Campbell Soup Company, the businessmen interviewed by US News and World Report declared, "All the business news is good -- profits up, sales climbing, output rising. Everything is breaking out on the upside."

The Great Society had begun.

It was at the height of its glory when, on July 4, 1967, President Johnson told a cheering crowd:

"We own almost a third of the world's railroad tracks, almost two-thirds of the world's automobiles, half the trucks, half of all its radios, a third of all the electricity, a fourth of all the steel . . . half of its wealth."

"And bear in mind," continued the President (who had forgotten to include half the world's oil) "that the rest of the world would like to exchange places with us."